Research On Application Of ABC In SH Electronic Engineering Company

With the change of the global industries’ structure, indirect expense is increasing itsratio within the various costs, and the production style has been changed to from massproduction of single product into small production of various products. If we continue torelocate the indirect cost with the previously existing labor work-hour, all the costinformation will certainly be too inaccurate to cause ineffective cost control and the wrongdecisions from the decision-makers.ABC (Activity-based Cost) will make full use of activity analysis, take priority totrace all consumed resources back to the daily activity through the resources’ workmotivation, calculate activity cost and calculate the allocation ratio from activity’s workmotivation, apply ABC into all related products. ABC is trying to avoid any inaccurateallocation, providing more true information and correct cost information. ABC is not onlya good way to calculate the cost, but a way to control the cost. It may recognize thevalue-added and non-value-added activity to help the decision-makers to control the cost,define a more reasonable product price, so that the company’s core competition will beenhanced.This paper firstly starts from the ABC definition, introduces the basic accountingprinciples of ABC and the4steps of implementing ABC, compares ABC with thetraditional costing, which provides the theoretical platform for the implementation of ABCin SH company. Secondly, this paper analyzes the general cost accounting at SH electronicengineering company and discloses the existing problems with reasons analysis, finallyfigures out the necessity and feasibility of ABC implementation. Thirdly, the authorconsiders the actual situation of the SH Company, taking3electronic components for1vacuum cleaner as a product example, finishes designing ABC operating process andconcrete implementation plan. It shows the advantage of implementing ABC at SHCompany, figures out its function of calculating accurately the cost information, helps the decision makers to analyze the value-added and non-value-added activity, raises theefficiency of the activities and decrease or stop any non-value-added activities. In this way,the Company can control the product and define the product’s reasonable price. In the end,this paper expects a better vision of the future and also expects to provide any betterreference for the electronic micro-engineering manufactures.